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UBS economists revise their forecasts for the Swiss economy

Zurich / Basel03 Sep 2008, 08:00Media Releases Switzerland

The Swiss economy is still quite resilient. However, it is increasingly apparent that
the economy will slow down significantly in the coming months. Due to the
gloomy outlook for the world economy, UBS economists revise down their
forecasts for the Swiss economy. They now expect real Gross Domestic Product to
expand by 1.9% this year and 1.0% next year.

In the second quarter, the Swiss economy managed to elude the developments in the rest of Europe. While most economies in Europe shrunk, the Swiss economy registered a slight acceleration in growth compared to the previous quarter. UBS economists expect, however, that this trend will not last much longer. The expectation for a prolonged global economic slowdown and persistently high oil prices - despite some softening - will likely take a toll on the Swiss economy. UBS economists therefore forecast a noticeable slowdown in the second half of this year that will be felt throughout 2009. Accordingly, they revise their forecasts for the Swiss economy down. They now expect Swiss real Gross Domestic Product to expand by 1.9% this year and 1.0% next.

Consumer prices should ease in coming months in line with the expected economic slowdown. Much of the recent increase in prices has been due to volatile energy prices. This effect should ease over the course of the year. UBS accordingly expect inflation to drop to 1.4% in 2009 from the 2.6% forecast for 2008. This would give the Swiss National Bank (SNB) the scope it needs to lower interest rates. UBS economists expect target rates to be cut by 25 basis points both in March and June 2009.